Manhattan Is the New Lilliput

It’s the staggering cost of Manhattan apartments in general. Or the abundant supply to buy from. Or maybe it’s just that New Yorkers like little things. Whatever the reason, studios and one-bedrooms have made up the majority of apartment sales in Manhattan during the housing boom (that’s still going on, by the way, according to second-quarter numbers out last week).

For every year since at least 2002—the boom’s advent, more or less—sales of studios and one-bedrooms have comprised at least one-half of the annual sales of all Manhattan co-ops and condos. In 2005, that market share was a peak 52 percent-plus; and, in the first six months of this year, studio and one-bedroom sales accounted for just over 50 percent, according to appraiser Miller Samuel, which issues a quarterly market report with brokerage Prudential Douglas Elliman.

Why?

Well, there are a lot of one-bedrooms and studios—starter apartments for the real-estate novices, the youngsters fresh from college and grad school, the ambitious professional climbers tired of renting, the fruits of especially well-heeled (and generous) loins. And this lot is cheaper than bigger apartments, for obvious economic reasons.

In the second quarter of 2007, the per-square-foot price of a Manhattan apartment rose 6.4 percent over the first quarter to $1,139, according to Miller Samuel; that was also up 5.2 percent from the second quarter of last year, a time when the $1,000 per-foot threshold might’ve commanded a few head turns. Now, it’s merely routine.

And, while the average sales price of every other size of Manhattan apartment increased from the first to the second quarter of 2007, the average for studios declined, however slightly (2.8 percent), to $442,893. The average sales price for one-bedrooms increased—again—to $741,267, still much, much lower than the average for all apartments, which went up to a near-record of $1,333,316.

In fact, the average price of a Manhattan apartment with two bedrooms or more was at least $1.63 million, more than twice the average for either a one-bedroom or a studio in the second quarter. In short: To go from a one-bedroom to a two- (or three- or four-) is to take a financial leap akin to moving from Wherever Elsewhere to Manhattan itself.

But people do it.

A hairdresser who relocated from Washington, D.C., earlier this year wanted to buy a Manhattan condo on an annual salary of about $75,000 and using the approximately $100,000 he’d made from the sale of his Washington home. His broker, Bellmarc Realty vice president Charlie Summers, gently eased him through the grim awakening …

“He wanted a bigger space, and he wanted a condo,” Mr. Summers said of his client, who was subleasing as he searched three months for a purchase. “He wanted to have real property, and wanted to have the ability to sublet whenever he wanted. He was born in France, so he traveled back and forth a lot.”

They hunted around the city, including in Brooklyn, and, finally, the client—who works at an upscale Fifth Avenue salon and who craved similar upscale in his home address—took Mr. Summers’ advice and bought in a West Village co-op with condo rules. He closed in April on the 411-square-foot studio for $445,000, plus $580 in monthly maintenance fees.

It was the happy culmination of another Manhattan real-estate meet-and-greet.

“They look around,” Mr. Summers said of first-time buyers, “and they kind of realize more about what they can really get into.”